Foreign investors gobble up Canadian government debt: StatsCan

After five straight months of net outflows, foreign investors jumped back into Canadian securities in May, driving a $10.1-billion net inflow of funds to the economy, Statistics Canada reported.

Foreign investors added $20.8 billion worth of Canadian securities in the month, which represented the largest total in a year.

Federal government debt was the primary target of that offshore investment, totalling $15.5 billion. That’s the second-largest total on record, eclipsed only by the unprecedented government borrowing activity in response to the onset of the Covid-19 pandemic.

Alongside the massive buying of federal debt, foreign investors also added $5.2 billion worth of provincial government debt in May, and they bought $6.1 billion worth of corporate bonds — although this was largely offset by investors dumping $5.6 billion worth of corporate money market securities.

Foreign investors sold $3.3 billion worth of Canadian equities in May. The reduction was largely due to redemptions of Canadian shares as a result of cross-border merger and acquisition deals, StatsCan said.

Foreign investors did buy Canadian stocks in the secondary market, it reported, with bank stocks as the primary target.

At the same time, Canadian investors bought $10.7 billion worth of foreign securities in May, led by U.S. equities, which accounted for $8.5 billion of the total, primarily large-cap tech stocks.

“This marked a 13th consecutive month of investment in these instruments for a total of $151.6 billion, with two-thirds in the form of U.S. shares,” StatsCan said.

Canadian investors also sold $1.6 billion worth of non-U.S. foreign shares in May, and bought $3.7 billion of foreign debt (mostly U.S. government and corporate bonds).

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.